Zhixin Finance and Economics APP learned that Open Source Securities issued a research report stating that the main contradiction in investment decisions in the current gold and jewelry industry lies in the sales end. Therefore, it is necessary to combine the trend of the gold price with the market feedback for judgment. A sharp rise in gold prices may continue to suppress terminal sales; gold price fluctuations are conducive to consumers to gradually digest their wait-and-see sentiment, but it takes time. It is necessary to closely monitor the marginal changes in feedback from terminal sales and judge turning points. In addition, with a sharp drop in gold prices, the enthusiasm of consumers to 'buy gold' is expected to recover, boosting the industry's business prospects. Bullish on gold and jewelry brand companies based on the dual-drive of 'single-store sales + store quantity' to achieve sustained growth, the concentration of industry leaders has increased, and the attributes of 'stable growth + high dividends' are more prominent.

Multiple factors drive the continuous rise of gold prices, and the long-term prospects of the gold and jewelry industry are viewed favorably.

Since March 2024, international gold prices have repeatedly hit new highs. In the future, the expectation of a US interest rate cut, an increase in global liquidity, and central banks around the world increasing their gold reserves will continue to support the long-term performance of gold prices. Against the backdrop of rising gold prices in recent years, China's gold consumption has also shown an upward trend in resonance with gold prices, supporting the growth of the industry's scale in terms of both quantity and price. From a medium and long-term perspective, the 'certainty' label of value preservation and appreciation of gold in the public mind is gradually established, driving demand growth for gold investment; while the technological and design innovation of gold jewelry coupled with the trend of 'new Chinese style' is also expected to continue to stimulate demand for daily consumer goods made of gold. Bullish on the long-term performance and investment opportunities of the gold and jewelry industry's leading brands.

The rapid rise of gold prices in the short term is conducive to improving the profitability of brand owners, but beware of the 'price trap'.

The rapid short-term rise in gold prices is expected to benefit the profitability of brand owners in terms of inventory appreciation: the value of gold inventory (including raw materials and finished products) increases when the gold price rises, and it is realized as an increase in gross margin when it is sold. The specific degree of benefit still needs to consider the differences in different brands' procurement models (such as gold leasing and hedging ratios) and sales models (wholesale or self-operated retail, etc.). Secondly, some brand owners earn the wholesale price difference of each gram of gold according to a fixed rate mode in the wholesale link, so when the gold price rises and the base is raised, it will also increase the corresponding wholesale gross profit. Combined with financial data of some listed companies, it is indeed seen that the performance of some brand owners' quarterly gross profit margin shows a clear positive correlation with the quarterly increase rate of gold price.

Based on historical data analysis, it should also be noted that on the other hand, rapid rise of gold prices sometimes brings the 'price trap' on the sales end, that is, a sharp rise in gold prices causes consumers to hesitate and wait-and-see emotions, thereby inhibiting terminal sales. When this situation arises, franchisees will be the first to be affected: on the one hand, stores need to increase discount efforts to boost sales, thereby weakening the appreciation of inventory and intensifying market competition; on the other hand, a high gold price implies higher costs of goods for new store openings, which will also affect franchisees' willingness and pace of opening new stores. These impacts will further be transmitted to the brand side: that is, the daily store replenishment of franchisees, large-scale ordering fair purchases, and new store opening purchases will all decline, thus directly affecting the income performance of listed companies' franchise business.

As for the symbol, it is recommended to focus on Guangdong CHJ Industry (002345.SZ) and Chow Tai Seng Jewelry (002867.SZ), whose valuations have returned to a reasonable level and have sales and store opening flexibility, as well as Old Fengxiang (600612.SH) and China National Gold (600916.SH), which benefit from the rising gold price and have advantages in gold investment products. Beneficiary targets include Vegetable Basket Shares (605599.SH), Old Store Gold (06181), etc.

Risk warnings: consumption recovery is less than expected, market competition intensifies, gold price fluctuations, and new product launches fall short of expectations.